Treasurys back from brink after weak Philly Fed


A far weaker-than-expected read from the Philadelphia Fed - for the moment - is bailing the Treasury market out of what was shaping up to be an ugly day.

Following estimate-beating prints on jobless claims and flash PMI, the 10-year yield had shot higher by 6 basis points to 2.85%, but the weak Philly read has it back to 2.82%.

New Orders fell to 11.8 from 27.5. Shipments 5.6 vs. 20.4. Unfilled orders of -4.2 vs. 9.1. Employees 1.1 vs. 15.4. The future general activity index dives to 45.8 from 63.8.

TLT -0.3%, TBT +0.6%

Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, SHV, BIL, UBT, TLO, TBX, VGSH, VGIT, FSA, LBND, GSY, DTYL, SCHR, TYD, SCHO, ITE, TENZ, TYBS, TUZ, FIVZ, DTUL, SST, DTUS, TBZ, DFVL, DLBL, DFVS, TYNS

Complete Philly Fed report

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Comments (7)
  • davidshelton
    , contributor
    Comments (352) | Send Message
     
    How can the fed taper and contain the treasury market? I believe they are trapped between a rock and a hard place but they are valiantly trying to prep the markets for this move. I see a disaster coming.....
    Anyone have any thoughts as to how they can possibly do this without a very reaction from the bond markets?
    21 Nov 2013, 10:28 AM Reply Like
  • wmateri
    , contributor
    Comments (577) | Send Message
     
    davidshelton - "Anyone have any thoughts as to how they can possibly do this without a very reaction from the bond markets?"

     

    I think their plan is to increase their "forward guidance" that is to indicate that they will hold interest rates down for at least a year longer than expected. Not sure how that's supposed to help.
    21 Nov 2013, 10:37 AM Reply Like
  • davidshelton
    , contributor
    Comments (352) | Send Message
     
    Thanks. I assume you are talking about ZIRP? I'm not sure how that will help treasuries either. The question is where will be the new normal for interest rates and what that will do to the budget deficit and the consumer.....
    21 Nov 2013, 10:46 AM Reply Like
  • bfstrog
    , contributor
    Comments (74) | Send Message
     
    Long Term Treasuries are just a bunch of short term treasuries rolled over every period, with an added risk premium. In theory, if the Fed commits to keeping short term rates low for an extended period of time (and the Fed is credible), that should depress long term rates. If LT rates rise the markets doubt this credibility, or expect inflation. This statement doesn't take into account any buying or selling from the Fed.
    21 Nov 2013, 03:28 PM Reply Like
  • Marco Mazzocco, CFA
    , contributor
    Comments (190) | Send Message
     
    Technically the Fed has no actual control over LT rates. The treasury market will move based on peoples future expectations. Rates traders will definitely shoot first and ask questions later.
    21 Nov 2013, 10:50 AM Reply Like
  • Deja Vu
    , contributor
    Comments (1797) | Send Message
     
    The PBOC chairman said the other day that 3.7 trillion of US bonds and currency was quite enough and accumulating any more would be counterproductive. Wonder what happens when Chinese decide to stroll up one day and sell a few tens of billions of US bonds? I can imagine the look on the faces of the learned idiots at the Fed when they realize that they can no more control the yield than Canute control the tide.
    21 Nov 2013, 06:14 PM Reply Like
  • In4TheWin
    , contributor
    Comments (5) | Send Message
     
    China would be shooting themselves in the foot if they were to dump their US treasuries.

     

    1) Flooding the market would crush the mark-to-market value of their holdings and they would get cents on the dollar (i would willingly buy their severely discounted US treasuries)

     

    2) This exchange of treasuries would lead to them turing US dollars into other currencies and because we are their largest trading partner would cause considerable strengthening of the yuan to the USD. this leads to decreased Chinese exports and a damaged Chinese economy while improving US exports.

     

    3) The USD is safe until it is no longer the reserve currency of the world. Crude Oil, the lifeblood of the world is traded in USD no matter who you are.
    1 Dec 2013, 08:11 PM Reply Like
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